House of Representatives

SB 1206

schools; maximum property tax rate

Sponsor: Senator Burns

DP	Committee on Ways and Means
DP	Committee on Education
DP	Caucus and COW
x	As Engrossed and As Passed the House

SB 1206 establishes a maximum tax rate that school districts can impose on taxpayers.

History

The Tax Reform for Arizona Citizens Committee (TRACC) was established in 2002 and issued final recommendations in December 2003.  The Committee was established to examine the current tax structure, with one of their duties being to study and make recommendations on the tax policies of this State and local jurisdictions, including counties, municipalities, school districts and special taxing districts and to assure that the policies are adequate, equitable, competitive and consistent with economic development strategies.  One of the recommendations of this committee was a proposal to cap the primary property tax rate of any school district that has 50% or more of the homeowners at the 1% cap and the primary tax rate is 150% of the Qualifying Tax Rate (QTR) set by the Legislature.

This proposal will address some of the gross disparities that exist between school districts due to the allowance to budget for items outside their revenue control limit (RCL).  School districts that are permitted to budget for these items impose higher primary property taxes than other school districts.  Since the funding for these items outside the RCL comes from the primary property tax, without voter approval, it is also subsidized by the state two ways.  First, the state subsidizes primary property taxes by paying for any homeowner taxes that exceed 1% of the value of their home.  The second subsidy is the Homeowner’s Rebate program that pays for 35% of homeowner’s primary school tax rate.

For FY 2006, the QTR was set by the Legislature at $3.618 for unified districts and $1.8090 for non-unified districts and $0.4358 for the county equalization rate.  If this proposal were in place this year, it would apply first to any school district where fifty percent of their homeowner property is at the 1% cap and their primary property school tax rate exceeds $5.427 (unified district) or $2.7135 (non-unified district).  It will currently affect 19 school districts: Ash Creek Elementary, Ash Fork Unified, Bowie Unified, Colorado City Elementary, Combs Elementary, Eloy Elementary, Empire Elementary, Hayden-Winkelman Unified, Isaac Elementary, Mammoth/San Manuel Unified, Maricopa Unified, McNeal Elementary, Paloma Elementary, Picacho Elementary, Red Rock Elementary, San Simon Unified, Santa Cruz Valley Union, Toltec Elementary and Tucson Unified.

This bill could result in potential cost savings to the State General Fund by reducing expenditures for additional state aid programs.

Provisions

· Prohibits the governing board of a common school district, a high school district or a unified school district to fix, levy or assess a primary property tax rate that is higher than the current year’s rate if the district meets the following criteria:

· The total primary property taxes levied for all taxing jurisdictions results in at least 50% of the homeowners exceeding the 1% constitutional cap.

· The primary property tax rate exceeds 150% of the QTR.

· Requires the Property Tax Oversight Commission (PTOC) to determine which school districts are affected and to notify those districts by December 31.  The PTOC will also notify the county school superintendent and     the county board of supervisors.

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Forty-seventh Legislature

Second Regular Session          2          March 29, 2006

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